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ACCA TX: private residence relief explained
Private residence relief (PRR) exempts all or part of the gain on a home that was the owner's main residence. The examiner likes it because the month counting is easy to get wrong and it combines with traps on letting, business use and the final period.
The rule
PRR = total gain × exempt months ÷ total months of ownership. Exempt months are actual occupation, plus deemed occupation, plus the final 9 months of ownership. The final 9 months are exempt provided the house was the main residence at some point. Deemed occupation includes up to 12 months before moving in (where the delay is due to building work or selling the previous home), and up to 3 years of absence for any reason. The period before moving in requires the owner to occupy the house as a main residence afterwards. The 3-year absence requires actual occupation, as a main residence, both before and after the absence. Lettings relief is only available where the owner shares the home with the tenant. Part of the home used exclusively for business loses PRR for that part and that period.
Worked example
Mia bought a house on 1 January 2016 for £200,000. She lived in it until 31 December 2020, then let the whole house and never returned. She sold it on 31 December 2025 for £440,000.
Gain = £440,000 − £200,000 = £240,000.
Total ownership = 120 months.
Actual occupation = 60 months (2016 to 2020).
Final period = 9 months (1 April to 31 December 2025), which is exempt.
Exempt months = 60 + 9 = 69.
PRR = £240,000 × 69/120 = £138,000.
Gain after PRR = £240,000 − £138,000 = £102,000.
Lettings relief is not available, because Mia did not share the home with her tenants. The annual exempt amount (£3,000 for 2025/26) is then deducted, leaving a taxable gain of £99,000.
Remember: the final 9 months are exempt even if the house was let, but lettings relief is lost unless the owner lived in the house with the tenant.
Where candidates lose marks
Claiming lettings relief when the whole house was let after the owner moved out; since April 2020 it needs shared occupation.
Applying the business-use restriction to the whole period of ownership, when the rooms were only used exclusively for business for part of it.
Applying the time fraction to the whole house instead of only the business rooms (rooms used ÷ total rooms).
Try it: 4 questions
Kiran is employed as an operations manager by Rackvault Ltd, a data centre operator. On 1 July 2015 she bought a house for £200,000 and lived in it as her main residence until 30 June 2021. She then moved into a flat near the Rackvault Ltd data centre and let the whole house to tenants. She never returned to live in it. She sold the house on 30 June 2025 for £440,000.
A colleague prepared this working:
Gain before reliefs: £440,000 − £200,000 = £240,000 Private residence relief: £240,000 × 81/120 = £(162,000) Gain after PRR: £78,000 Lettings relief (lowest of PRR £162,000, £40,000 and gain on letting period £78,000): £(40,000) Chargeable gain: £38,000
Which of the following identifies the error in the working?
Answer: A. Rule: since 6 April 2020, lettings relief is only available where the owner is in shared occupation with the tenant, for example letting a room while still living in the house. Letting the whole property after moving out does not qualify, however much the PRR computation leaves chargeable.
Correct working: ownership runs from 1 July 2015 to 30 June 2025, which is 120 months. Actual occupation runs from 1 July 2015 to 30 June 2021, which is 72 months. The final 9 months are always exempt because the house was Kiran's main residence at some point. Exempt months are therefore 72 + 9 = 81.
Gain = £440,000 − £200,000 = £240,000. PRR = £240,000 × 81/120 = £162,000. Chargeable gain = £240,000 − £162,000 = £78,000. No lettings relief is available, so the chargeable gain is £78,000, not £38,000.
Why the other options are wrong: • Time-apportioning lettings relief: this repairs a relief that cannot be claimed at all. The error is still applying lettings relief to a whole-house letting with no shared occupation. • Removing the final 9 months: the final 9 months of ownership are exempt whenever the property has at some time been the owner's main residence. This applies even if the property is let during those months, so the PRR fraction of 81/120 is correct. • Deemed occupation for 4 years: absence for any reason is limited to a maximum of 3 years. It also only counts if the owner occupies the property both before and after the absence, and Kiran never returned. No deemed occupation applies.
Priya runs a bespoke furniture manufacturing business as a sole trader. She sold her house in 2025/26 after owning it for exactly 10 years. The house has eight rooms. For the first 6 years of ownership, two of the rooms were used exclusively as her business office and showroom. For the final 4 years, the whole house was used as her residence. Priya lived in the house throughout her ownership. The total gain is £160,000.
What is Priya's chargeable gain after private residence relief?
Answer: B. Rule: where part of a residence is used exclusively for business, PRR is denied on the gain attributable to that part for the period of exclusive business use.
Why the other options are wrong: - £nil ignores the business-use restriction entirely. - £40,000 (2/8 × £160,000) applies the restriction to all 10 years, although the rooms reverted to residential use for the final 4 years. - £96,000 (6/10 × £160,000) applies the time fraction to the whole house instead of only the two business rooms.
Owen is the lead developer at Pixel Forge Ltd, a mobile game studio. On 1 May 2019 he bought a house that needed major rebuild work. Because of the building work, he could not move in until 1 March 2020. He then lived there as his only residence for exactly five years and sold it on 28 February 2025.
Which of the following statements about the first 10 months of Owen's ownership is correct?
Answer: B. Rule: a period of up to 12 months before first occupation (extendable to 24 months where there is good reason) is treated as a period of occupation. This applies where the delay is due to building, alteration or redecoration work, or to selling the previous home, provided the owner then occupies the property as their main residence.
Application: Owen's delay was 10 months, from 1 May 2019 to 29 February 2020. The delay was due to the rebuild, and he then lived there as his only residence. The 10 months are therefore deemed occupation. Together with the five years of actual occupation, the whole period of ownership is exempt.
Why the other options are wrong: - Chargeable: this ignores the specific relief for delayed occupation. - Using the three-year 'any reason' allowance: the absence rules need actual occupation both before and after the absence. Owen had not occupied the house before this period, so this confuses the absence rules with the pre-occupation relief. - Only 9 months: this confuses the final 9 months exemption with the 12-month pre-occupation limit.
Callum is a director of Gearbox Components Ltd, a car parts maker, and is a higher rate taxpayer. In 2025/26 he sold the house that had been his main residence. The gain before private residence relief is £90,000. Of his 120 months of ownership, 100 months are treated as exempt. He made no other disposals in 2025/26.
What is Callum's capital gains tax liability for 2025/26?
Answer: B. Rule: the gain left after PRR is chargeable. The annual exempt amount of £3,000 is deducted, and a higher rate taxpayer pays CGT at 24% on residential property gains.
Working: - Chargeable gain = 20/120 × £90,000 = £15,000. - Less the annual exempt amount of £3,000 = £12,000. - CGT = £12,000 × 24% = £2,880.
Why the other options are wrong: - £2,160 uses the 18% rate, but Callum has no basic rate band available. - £3,600 (£15,000 × 24%) omits the annual exempt amount. - £20,880 ((£90,000 − £3,000) × 24%) ignores PRR.
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How do you calculate private residence relief for ACCA TX?
Divide the exempt months by the total months of ownership and multiply by the gain. Exempt months are actual occupation, deemed occupation and the final 9 months.
How long is the final period exemption for private residence relief?
It is the final 9 months of ownership, provided the property was the owner's main residence at some time. It applies even if the house was let or empty in that period.
Can I still claim lettings relief on a house I moved out of and let?
No. Since 6 April 2020, lettings relief only applies where the owner shared occupation of the home with the tenant, such as letting a room while still living there.